Pernod Ricard S A

Good morning everyone and thank you for joining us to Pernod Ricard's Fiscal Year 26 full year results. I'm joined today by Alexandre Ricard, Chairman and CEO, and Mauve Croizat, Group Deputy CFO. We are delighted to welcome Mauve to her first earnings call with us. Alexandre, over to you.

Thank you, Joël, and good morning, ladies and gentlemen. Maybe just before starting, I'd like to introduce Mauve Croizat, our deputy CFO and soon-to-be CFO as of October 1st. Maybe, Mauve, can you say a few words about you?

Yes, thank you, Alex. Very happy to be with you today. So I usually say that I'm born and raised Pernod Ricard. I was very lucky to move in many different countries, U.S., Sweden, for many years across multiple affiliates. So a brand company, brand company, market company. Headquarter and different functions because I started with cash and then more FP&A and co-finance with some years as general managers and lately within transformation. So very happy to be with you today, very honored to take on the role and very prepared.

Well, thank you very much, Mauve. And without further ado, let's start with our fiscal year 26 sales and results. Overall, our fiscal year 26 was characterized by a contrasted environment, with indeed continued softness in the U.S., amplified by some inventory adjustments, and weak demand in China. Thank you very much. and with full delivery now expected by fiscal year 28 instead of fiscal year 29 i.e. one year ahead of anticipated. Driving as well sustainable cash generation to preserve a strong balance sheet with materially improved cash conversion in fiscal year 26 at 91%. Optimizing as well our strategic investments for future growth, maintaining balance sheet discipline to support our deleveraging trajectory and sustainable shareholder returns. Maintaining a stable dividend per share, with the final dividend of €2.35 to be offered either in cash or in shares. So we fully leveraged the breadth of our portfolio and the balanced geographical footprint of Pernod Ricard to capture growth opportunities at speed and scale across diverse and increasingly diverse, should I say, consumer dynamics. And our operating model leverages its digital capabilities, accelerating to a fully digitally enabled organization. So I won't go back on the environment that I just described. What I would underline is our net sales are down roughly 4% organically and 14% reported related to currency and pyramid impacts. That being said, we have experienced improved momentum in the second half of our fiscal year. With organic growth improving from, remember, minus 5.9% in our first half to minus 1.3% in the second half. And in fact, excluding the US and China, which we'll go through in detail later, growth was positive for our fiscal year in the rest of the world, up at plus 0.5%. From a PRO standpoint, down roughly 5% organically and roughly 18% reported for the same reasons as the net sales. We have done quite an amount of work to defend the organic operating margin in a contrasted environment. We have accelerated the operational efficiencies program I mentioned, enhancing as well marketing effectiveness and partially mitigating tariffs and COGS inflation. As you'll see in more detail, our structure costs are down 8%. They were already down 4% in the previous year with the implementation of our fit-for-future operating model and disciplined cost managers. As for cash, at 1.2 billion euros of free cash flow, a progression of 6%, we have strengthened our cash generation and strongly improved our cash conversion, as I mentioned, at 91%, through disciplined investments and working capital management. We continue the active portfolio management, notably fiscal year was a year where we disposed of Imperial Blue. I will not spend time on this slide as Mauve will go through all of these numbers in detail other than stress the EPS at 5 euros and 85 cents. So yeah, I mentioned the contrasted environment and our top line was notably impacted by market-specific weakness. In the US, you see the US down 14%. I'll talk about this in a couple minutes. In China, down 19%. And finally, the Middle East skews towards our fourth quarter, which was down 29%. These three specific areas impacted our top line and weigh roughly one-fourth of our top line. When I mentioned mitigation, mitigation came from broadly the rest of the world. With improving trends in many markets, we have now roughly 40% of our at-home sales that are in growth. As I mentioned, excluding US and China, the rest of the world would be growing. By the way, the remaining top 16 markets' sell-out value grew at double the market rate, at plus 2%. That's a mix of Nielsen, NAPCA and IWSR data. So we estimate that for the top 16 markets, the market grew 1%. We grew double that rate. You have here a number of examples, both of emerging markets and mature markets. And by the way, you see that slight acceleration for Pernod Ricard excluding China and the U.S. H1 was flat. H2 was up 2%. Of course, we've done a lot of work to adapt and continue to do so at pace to evolving consumer trends and to growth opportunities, leveraging our data and technology capabilities and as well our new simplified organization following tomorrow one and tomorrow two. and the name of the game in a way is really speed and agility. Consumers have always changed over time. I would say the major difference here is the speed at which they change. So we've done a lot of work Thank you very much. on what we call affordable premiumization, working on our RTD portfolio extension, on the route to market adaptation to our RTD portfolio as well, and as well on a number of initiatives and increased capabilities on revenue growth management and promotions optimizations, as I said, leveraging our digital capabilities. We are on the other hand of the spectrum leveraging the depth of our portfolio including prestige with the development of unique brand and experiences through very high-end partnerships. We have a global approach to build our prestige and brand desirability and direct high net worth individuals consumer approach. We have accelerated, and I'll talk about it in a couple of minutes, our consumer-centric innovation with the inflection point being innovation at scale, or should I say purposeful innovation at scale, with a number of big successes. And finally, we are continuing to invest in elevating cultural relevance, consumer experiences, and brand associations and partnerships. Now moving into our sales by must-win markets. So starting with the US market, which was down 14%, as I said. So we have sustained improvement in our sell-out gap to market. Thank you very much. Thank you very much. Just to mention, our sellout is roughly down 7% versus the minus 14% sell-in. This is where our sales have been impacted, as we mentioned, by some inventory adjustments. Good performance around Jameson and Kalua, which outperformed their competitive sets. Screwball and Malibu sellout are improving, helped by strong success... Thank you very much. Consumer Activation, RGM as I mentioned, Innovation, Ready to Drink Small, Fun Formats, On-Premise Activation, and Cultural Partnerships. We'll talk about this later. And finally, the Route to Market Reorganization, which has finally... Thank you very much. Very strong momentum reflecting underlying consumer demand. and a market where we are gaining share. So we see an accelerated performance which is underpinned by very dynamic consumer demand, market share gains, further benefiting from the imperial blue disposal which was at a segment which is less dynamic than the more premium segments. Good growth on our local brands, notably Royal Stag, which you may have seen in the news is now the world's number one brand. Thank you very much. Thank you very much. We had mentioned the excise policy changes in Marastra just exactly a year ago, which were finally now lapping since this summer. And more recently, in fact, as of July 15th, last month, we now have the India-UK trade agreement, which is in full effect. Moving to China, which now represents 7% of our total sales, down 19%, basically characterized by challenging macroeconomic conditions, continued weak consumer sentiment, and regulatory measures impacting demand. Thank you very much. and increasing penetration of premium spirits among the growing middle class. So we experienced market share declines in cognac, basically impacted by Martel's channel exposure. That being said, and it's the first time in a while where we can be in a position to say this, we are getting feedback of cautious optimism from the trade sentiment ahead of Mid-Autumn Festival. So let's see what happens in the next couple of months on that front. Finally, in terms of must-win markets, global travel retail down 3%. Basically, the resolution of the Cognac suspension in China, which occurred exactly more or less a year and a month ago. Strong brand activations across Asia and the dynamic traveler numbers in Europe and Americas are what basically characterized global travel retail for fiscal year 26. International passenger traffic continues to grow. It is now 10% ahead of pre-COVID levels. Transcription by CastingWords Strong innovation execution was quite successful, particularly around travel retail exclusive ranges, notably on the Glenlivet and our other single malt, Aberlau. We also gained market shares in that channel. And as you all know, our fourth quarter was impacted by the Middle East conflict, which is also expected to weigh in our first quarter of this new year. More broadly speaking, when it comes down to the regions, by Europe we see sales declining in France while maintaining market leadership and gaining share, with PJ and Bamboo in very strong growth. Spain and Germany, unfortunately, are both in decline amidst continued, I would say, soft market conditions. UK is in modest decline with growth on Jameson, Absolute and the Champagne, although we see some degree of improving market trends there. And finally, Eastern Europe is in continued growth, notably on Jameson, Ballantines and Absolute. Poland was in modest decline following a strong excise tax increase, though we're gaining share there. In Americas, beyond the US, we see solid continued growth in Canada, driven by Jameson, Absolute and our RTD portfolio, in what we could qualify a soft market and therefore translating into market share gains. Brazil was in modest growth, recovering, by the way, in the second half from the methanol crisis, which hit us just ahead of Christmas in Brazil, with good performance on Beefeater and Absolute, notably, though we're experiencing a slight share loss there. Mexico is and was in sharp decline over fiscal year 26 with share loss in what I would qualify quite difficult market conditions there. Finally, for Asia, the rest of the world, Japan continues on its great strong growth trajectory with strong market share gains, very strong performance of PJ. South Korea returned to growth after what we can qualify as a significant reset which has hit us in the past, as you may recall. Taiwan market sales continue to decline with continued softness in that market. Very strong growth in Turkey, notably with Chivas and Ballantines and also Appfood and I would say as well the rest of the portfolio. South Africa is in good growth, we're gaining share there, driven by the exceptional performance on Martel, not just by the way in South Africa but across sub-Saharan Africa. Australia is in modest growth with contrasted brand performance, growing on Jameson, growing on RTD's portfolio and Champagne, again a market where we are gaining share. This is a brief outlook after the regional description, which makes this quite unique in terms of geographical mix and exposure. The other uniqueness, I believe, of Pernod Ricard is our broad portfolio of brands, our diversified and broad portfolio of brands. Thank you very much. Jameson being our largest brand, Martel, Absolute, Ballantines and Chivas are the five largest brands of Pernod Ricard. I mentioned PJ's amazing performance, up 20% throughout the fiscal year. And just to note, for Martel, TD means triple digit growth in South Africa. Just below that you have Nigeria, where Martel is now. Leading in that market. Now moving on to the financial update. Move up to you.

Thank you. So indeed, let's go on the financial performance. So I'll be quick because you have all the numbers on the slides. But our profit from recurring operation declined by 5.2% organically and minus 17.9% on a reported basis. So we told you that we were going to protect the margin and we delivered, limiting the impact to a minus 35 bps. If we zoom into the impact, it's mostly driven by the gross margin impact where we experience a negative price mix in a soft pricing environment as you know and experiencing some adverse market mix. We had also the impact of the tariff, though a little bit less than what we feared at the beginning of the year in both US and China. And as we anticipated on the COGS, we had inflation, lower volume absorption, and as anticipated as well, increase on our wet goods impacted by past inflation. But we also very much benefited from the acceleration of our operation efficiency, managing to limit the impact and offset the normative inflation. If we go on ANP, so here we maintain significant investment behind our brand and we slightly benefited from decreased non-working ANP, highlighting as well the improvement of our effectiveness. On structure costs, as Alex mentioned, the reorganization is in place as from January 1st, so allowing us to showcase a decline on our structure costs as it was combined with a very strict discipline cost control, so leading to a minus favorable impact of 77 bps on this line. Overall, you can see on the slide as well that our reporting operating margin was significantly impacted by FX that was only partly offset by the perimeter impact where we had the benefits of our brand accretive disposals. So all in all, what I note on this slide is that despite and would we not have such significant FX impact, Our margin would have even expanded. On the earning per share, we are lending at 5.85 euros, down 19%, which is mainly the result of the soft profit from recurring operation. And we can see here on the financial expense a slight decrease as well, though we had a slight increase in our cost of debt from 3.2 to 3.4% as a result of a We had also a lower income tax in line with the decrease in our PRO. On the group share of net profits, here we declined at a slightly higher rate at minus 26%, which is mainly driven by a slight increase in our non-recurring operations and charges, which is mainly driven by our restructuring costs. On free cash flow, I think you all know that this has been a strong focus from the organization this year. So I'm very pleased to see that we are delivering a free cash flow increasing by 6%. This is driven by a strong and material improvement of our cash conversion, overpassing our target of 80% and landing at 91%. This is due to a strong and strict monitoring and discipline on our operating working capital and the optimisation of our strategic investment on both strategic inventories and capital expenditure while lending at a level that we believe is the relevant level to protect our assets and our future growth prospects because it was really following a year of peak in FY25. So on the net debt, needless to say that as a newly appointed CFO, that would be one of my key points of attention. This year, our net debt remained broadly flat over the past 12 months, benefiting from a strong free cash flow delivery, as I mentioned, but also the proceeds of our disposals. and because of the softer EBITDA we are experiencing an increased net debt EBITDA ratio up to 3.7% but our intention is definitely to decrease this level below three times by FY29.

Back to you. Thank you, Mauve. As we have now gotten a little bit accustomed to do over the last 18 months or so, I think it's worthwhile sharing with you a strategic update on Pernod Ricard. In today's case, in this presentation, it's split into three sections. The first one, on our purpose and transformation journey. The second one is what I would call a consumer-centric growth strategy turning consumer insights into action. And the third one is our capital allocation strategy and financial policy. When it comes down to our purpose and transformation journey, first of all, I strongly believe and we at Pernod Ricard all collectively strongly believe that our purpose is absolutely anchored in timeless human needs. We're not even talking here about consumer insight. We're talking into about deep human needs. And that purpose of Créateur de Quantité is probably more relevant And it is true, and I think all of our industry peers have identified this recent evolution. Consumers drink more intentionally. They need a purpose. They need a reason. They need an occasion. to do so. So we create more reasons to come together and more meaningful experiences around our brands. I fundamentally believe growth will come from enriching existing occasions and creating new ones. Expanding the shared experiences that at the end of the day bring people together around our brands. Our long-term drivers, and I won't dwell too much on that because it's a slide we've been showing and sharing with you for some time now. The long-term drivers do remain attractive despite these short-term headwinds and tailwinds. So you know the attractive long-term fundamentals around demographics, middle class, and by way specifically for international spirits. You know also the near-term cyclical pressures we are facing in some specific markets related to consumer confidence and pressure on discretionary spend. And finally, the evolving at-pace, as I mentioned earlier, Transcription by CastingWords Again, I do believe that our operating model bears here a serious competitive advantage insofar as our broad and balanced geographic footprint, very well balanced both across All the different regions and key, I would say, continents, but also in terms of that ideal balance between mature markets and emerging markets. Here you have all the details. I think that is what makes us quite unique from that point of view and is a competitive advantage. And so is as well our diversified portfolio of premium international spirits. which I believe is well exposed to the growing segments. By the way, we are present in every category that matters. You see this on the pie chart. We are also present on every single, I would say, price point segment from standard, which represents roughly 15% of our portfolio, all the way through to prestige. And as well, you see on the extreme right there, The RTDs as well. When I mentioned that we're ideally exposed as well, if you look at total beverage alcohol, there are a number of segments that are still and good growth or growth. If you look at international spirits for the last calendar year 25, which is the latest number we have, that segment has grown by 1%. If you look at Indian whiskeys, overall they grew 7% versus an underlying trend for us of 9, by the way, but anyways. Champagne is up 5% versus 20% for PJ, but anyways. And spirit-based RTDs, which is the segment on which we Thank you very much. Of course, and we have been on a journey over the last four to five years of significant transformation. And I'd like to hand this story over to Mauve, because before being deputy CFO and soon to be CFO of Pernod Ricard, Mauve has served as our global senior vice president for transformation. So in a way, you kind of drove what we see on this slide.

Some of it, not all of it. The rest was really managed by the organization and the teams. But indeed, for us, this has been a continuous journey, I would say. And the initiative that you see on the slide is a result of action over multiple years and across multiple dimensions. So if we start with the organization, so as you know, over the time, we've been really focusing on simplifying our organization for further agility. We have been also intensifying our efficiency program in order to deliver further efficiency. And we have been doing so without jeopardizing on our ability to invest behind our digital transformation that we believe is also going to fuel further and the future opportunities. Lastly, we have also been constantly looking at sharpening our portfolio. So on the organization, as mentioned, we have been taking a two-step approach, which we called Tomorrow and became Tomorrow One, Tomorrow Two. The first step was really focusing on de-layering with the removal of our regions and really bringing market together under 10 management entities. And the second step was more on the way we're managing the portfolio. So really simplifying our global functions and also bringing our eight market companies into two brand units in order also to reflect the differentiated business models that we have within our portfolio. So this allowed us to really constantly deliver tight and controlled structure costs with a decrease and reaching this year minus 8% and a second consecutive year of decrease. This has been also helped by a strong delivery on our operation efficiencies. So we communicated that we were going to deliver a very ambitious program of 1 billion over FY26 till FY29. And here we are able... Thank you very much. And as I said, this was done in order to improve our efficiency, but also to allow us to really invest behind our digital transformation. So we started by proving all the benefits that it could give us with the successful execution and implementation of our key digital program. and now the focus of the organization is really to make sure that we can scale these benefits to its full extent at pace and with agility. So we are really focusing now on building the relevant foundations creating also common processes, building tighter and creating tighter governance and ensuring that we have higher quality data because we know that this is where relies all the power of this digital transformation in order for us to become a fully digitally enabled organization that will really allow us to operate, reshape the way we operate and ensure that we will be delivering at speed, at scale with this ability to Adapt constantly to a faster evolving consumer need. One proof point of that is also what we have been able to deliver on our ANP spends, because here, by optimising our touchpoint and leveraging the digital media, we allowed ourselves to significantly improve our effectiveness. We also managed through that to decrease our non-working, to really increase what's going to be impactful towards our consumer and showcasing significant improvements of the impact of our spend towards the consumer. In parallel, as I said, we've been constantly looking at our portfolio, sharpening it by disposing of non-strategic dilutive brands, as we saw last year with notably the sale of Imperial Blue that allows us to be more competitive in a tighter margin and better margin and with a better growth profile in a key strategic market. We are definitely counting on continuing this effort as illustrated by the sales of lumps last month.

Thanks, Mauve. So, the second chapter of our strategic update, from insights to action, from consumer insights into execution on the ground, what I call our consumer-centric growth strategy. As I mentioned, there is a rapidly evolving consumer landscape where the speed has significantly accelerated, which really requires insight-led decisions and faster, much faster execution. We have identified, along with our consumer insight teams around the world, a number of consumer insights, broad number of nine very specific consumer insights, which all are translating into tangible, The first one is spirits exploration. And by the way, I think you probably saw in more recent research and studies, Gen Z continues to engage in spirits. Repertoires, however, are growing to include many, many categories. And it's a very dynamic, I would say, need segment which represents an opportunity. Second, and that's not new, affordability, which is somewhat of a headwind with low confidence, as I mentioned earlier, pressured discretionary spend, fear of inflation. Number three, novelty slash innovation. So a real desire and openness of our consumers for innovation, for flavors, for formats. When I talk about formats, for fun and attractive formats. Convenience, as I said, an emerging trend before COVID, which has accelerated quite significantly ever since. So in what we call a cluttered and time-pressured environment for people, they want quick change. and easy options, should I say. Mindful moderation, no need to mention this too much, you all know about it, with rising health consciousness, with claimed spirits moderation, widespread of course, and finally craving connection, Cédric Ramat, Cédric Ramat, I won't go through this much more in detail because you're all too familiar with this, the demographics, the emerging middle class, and status-driven premiumization, not only in India but in many, many emerging markets. Very briefly, one by one, starting with spirits exploration, we are leveraging our capabilities, which you're now familiar with, including our simplified organization that Mauve described, to really leverage and really create these occasions and also evolve our media targeting, shifting towards the most active and the most efficient media channels. Affordability I mentioned, addressed through revenue growth management capabilities, through our portfolio press ladders, through formats as well. The reality is small and fun formats really satisfy consumer desire for premium products, despite economic constraints. So when we give The opportunity for consumers that are under, I would say, purchasing power pressure, they do go for the premium proposition if it's at the right price point. Here you have an illustration, a US example, I think it's New York. If you see all of our different price points that we cover with information, Jérôme Cottin-Bizonne, Anne-Marie Poliquin, Florence Tresarrieu, Alexandre Ricard, Cédric Ramat, Eric Benoist, Maria Pia De Caro But I would say a lot of work is going on on three things to address this opportunity. Let's not forget supply chain. By the time we have the idea and it comes to shelf, there's a minimum number of time. Number two, which I would say is equally an operational challenge, is the implementation, execution and deployment, i.e., Having these propositions at the right price, on the right shelf, facing the right consumer. Because from a route-to-market standpoint, it's a big job to be done and which is as well underway. And third... Thank you very much. Thank you. Novelty is another one, and here you have three examples. Now, innovation has moved to purposeful innovation at scale. In a way, fewer, but bigger and better. Here you have our key innovation pipeline. It's broader than that, but here you have the key ones, the ones we launched in fiscal year 26, which are going to continue to be deployed across our markets throughout this new fiscal year, plus some new innovations to come down the road during this fiscal year. The fourth insight is indeed convenience. I mentioned it earlier, but spirits-based RTDs are the fastest-growing RTD segment, and this is somewhere we can play quite seriously in. We also know that Gen Z over-indexes amongst RTD drinkers, which in a way... Jérôme Cottin-Bizonne, We have multi-packs, mini formats and smaller formats as well and many other initiatives around that consumer-insider convenience. Mindful moderation, which we address through a number of initiatives around premiumization on one side, amongst the expansion of lower, no low, ABV offerings. And let's be clear, there is a drink less but better trend, which works well if we engage with the right propositions with our consumers. The abstinence rate has remained stable over the last five or six years. We are seeing, as I mentioned, that trend of less but better. And you see here a few examples of what we're doing in terms of premiumization through a brand franchise and innovation, through addressing... Jérôme Cottin-Bizonne, Anne-Marie Poliquin, Florence Tresarrieu, Alexandre Ricard, Jérôme Cottin-Bizonne, Maria Pia De Caro The Right Partnerships. We have a specialized team of experts that know how to basically work on partnerships. You have here a number of partnerships, and these are increasing. And behind every one of these partnerships, we have a very specific and clear execution strategy. What I would say is I would just take one example. People in key Asian markets, for instance, really want to see their friends. 25% more than they currently are. And it is our role, in a way, as créateurs de convivialité, to create these meaningful occasions, to bring them together with our portfolio, which I believe is very well positioned to do so. And then finally, the last three trends all in one, would I say, which are skewed towards emerging markets, which are demographics, I won't go through the numbers, you know them, which is the emerging middle class, I won't go through the numbers, you know them, and finally, which is status-driven premiumization, which we still see basically everywhere in emerging markets. and finally to the last section of our strategic update on capital allocation and financial policy.

I think this one is for me. So indeed, with this slide, we really wanted to reiterate our strong intent to bring our leverage ratio down below three times by FY29 and really illustrate the thing that we have already been doing this year and confirm that this is our intent to maintain it over time. So first on our strategic investments on both capital expenditure and strategic inventories where we are decreasing our level and capping it to 700 millions and also maintaining and combining it with a strong effort on our operating working capital and really also increasing our target from 80% to circa 90% in the coming years as we have been already delivering this year. So that's our intent and the pillow.

Yes, and subject, of course, to shareholder approval, we propose to maintain our dividend at €4.70 per share. As part of our commitment to our deleveraging trajectory, we will offer our shareholders the choice of receiving their final dividend of €2.35, either in cash or in shares. And I think it's worthwhile noting the support of our reference shareholder for this proposition and the fact that they will opt for the shares.

On our financial policies, I think it reflects a balanced approach to capital allocations. So while maintaining our investment grade rating and, as mentioned, our deleveraging focus, we are really reiterating very clear priorities. First, to invest behind our future growth targets. to really continue actively working in sharpening our portfolio. Three, maintaining a progressive dividend policy. And last, the share buyback when all above priorities will be fulfilled.

So in terms of outlook, let's start with fiscal year 27. So for this fiscal year, we expect organic net sales to be broadly stable in a contrasted and uncertain environment. Basically, with two messages here. First of all, declines in the US and China, impacted by inventory adjustments as of the first quarter, and with underlying trends that are expected to improve in China. And second, continued positive momentum in the rest of the world with ongoing strong growth, notably in India, but not just in India. Continued investment behind our brands with our A&P to net sales ratio to be maintained at circa 16%. We will strongly defend our organic operating margin supported by strict cost control on one side and the acceleration of the implementation of our operational efficiency initiatives whilst investing in our digital transformation. We expect strategic investments to be at circa 700 million euros versus 800 million euros previously guided. We also expect strong operating working capital management with cash conversion now expected to continue at circa 90% versus 80% previously. When it comes down to our median term framework, not guideline, but framework, while noting the current softness, I would say, in the U.S. market, we are projecting organic net sales growth aiming to be, on average, close to the lower end of our plus 3% to plus 6% range over fiscal year 27 through to fiscal year 29, i.e. close to 3%. We expect organic operating margin expansion, supported by the acceleration of our operational efficiencies of 1 billion, which we mentioned earlier, which will be done one year ahead of plans, while maintaining as well consistent investments behind our brands, as I mentioned, at roughly 16% A&P to net sales ratio. We expect a strengthened cash generation aiming now for 90 versus 80% cash conversion to fund our financial policy priorities with strategic investments normalizing to no more than 700 million euros. We are targeting a net debt to EBITDA ratio below three times by fiscal year 29. We continue to adapt our strategy and to capture growth opportunities and our operating model to meet those changing circumstances, including through our ongoing digital transformation that will unlock further efficiencies. And I would conclude by stating that we are confident in the continued engagement of our teams and that we remain focused to deliver sustainable value growth over time. On that note, I thank you very much.

True mastery only has itself to beat. New Chivas Regal 16 Charles Leclerc Limited Edition We're going to kick off the Q&A.

We're going to kick off the Q&A so we can open the operator. As usual, please, it will be two questions each. We can start.

Thank you. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star N1 on their touchtone telephone. To remove yourself from the question queue, please press star N2. First question is from Jen Cross, BNP Paribas.

Good morning, Alexandra. Good morning, Mo. Thank you for the question. The first question is just on the U.S. I think in your outlook commentary you comment on expectation of an improvement in underlying trends in China. I just wondered if you could comment on whether you expect your underlying trend to also improve in the U.S. in FY27.

And the second question is on India.

You saw a nice acceleration in growth in Q4. The question is specifically on the potential for an India IPO. I think it's something that is regularly discussed at the board level. Does that continue to be the case now? Thank you.

Sure, listen, I'll take these questions. Listen, the key reason for, I would say, skewing towards the lower end of that midterm framework of plus 3% to 6% top playing over fiscal year 27 through to fiscal year 29, i.e. close to 3%, comes from the acknowledgement that the U.S. market will remain soft over that period. It's as simple as that and it's difficult to say more than that, but that's what our current algorithm takes into assumption and that drove that revised, I would say, framework towards the lower end. On India, yes, the board continues to discuss the India IPO opportunity. Again, it's a question of the strategic opportunity it may represent in terms of shareholder value creation, and they're weighing the strategic rationale, the Thank you very much. But at this stage, we're still at discussion level at board.

Thank you very much.

Next question is from Mitch Collette, Deutsche Bank.

Thank you. Good morning, Alex. Good morning, Mauve. Two questions, please. So for your full year 27 guidance of flat organic growth, you say it's predicated on improving trends in China. Can you give us some colour on what drives that confidence about improving trends in China? And then my second question is also on the 27 guidance. So you said you're going to strongly defend organic operating profit margin. In fiscal 26, a similar statement equated to a 40 basis point decline, but clearly you had the support of lower A&P. So can you give us the sort of rough moving parts for fiscal 27 and would a similar level of organic operating profit margin decline be a correct interpretation of your guidance today. Thank you.

Sure, thank you. On your first question, maybe predicated is a little bit of a strong word. We have, and again, I'm very cautious on that front, and by the way, our assumptions remain quite cautious for China for this fiscal year when it comes down to sharing with you our fiscal year 27 guidance. What I have mentioned is we are Seeing some degree of underlying trends improvement, number one. Number two, we are getting some cautiously optimistic trade sentiment feedback ahead of mid-autumn festival. And number three, our assumption anyways is based on some degree of stock overhand that we need to destock. which is probably going to impact more the Q1 and the rest of the year but so that our guidance is not predicated on China which represents remember seven percent of our total business

So on our defence, on our operating margin, so indeed we know that we will be facing similar but different headwinds, I would say, because we can also already anticipate similar impact on our wet goods. Jérôme Cottin-Bizonne Thank you very much. I hope it answers your question.

Yes, thank you both.

Next question is from Sarah Simon Morgan Stanley.

Yes, good morning. Thank you for taking my questions. Two from me. One was, can you give us a bit more colour on where the savings of 500 million that were achieved in fiscal 26 actually fell in terms of maybe a split between And the second point was on your midterm guidance, Alex, you talk about an average towards the low end of the range of around three, but if we do, if we say around three across a three year period and the first year is zero, that would imply four and a half percent or so in years two and three. Is that what, is that what you imply? And if so, how do you think we're going to get there? Thanks.

I'll address your second question immediately before a move gives you some color. First of all, it's not a medium-term guidance. I'm sorry to have to reiterate. It's called medium-term framework. It's not around three, but I don't know what the terminology difference may mean, but it's close to three. Yes, fiscal year 26 was a little bit softer than what we expected it to be. Bear in mind a number of factors that impacted fiscal year 26. Number one, destocking in the US. which we don't expect to be that severe in the coming year and obviously years for sure. Number two, some degree of destocking in China for the year to come. Thank you very much. I'm not a geopolitical expert, but I'm just saying it has impacted our Q4. We expect it to continue to impact us over the coming few months to some degree. We're already seeing things starting to normalize to some extent. So basically at the end of the day when you look at during the presentation our geographical mix and you see where we're present and if you see those markets where we're growing quite significantly, those markets where growth in fact is accelerating, those markets that used to be in strong decline that are stabilizing, even maybe growing. I took the example of Korea, but there are a number of other ones. At the end of the day, it works.

So I take the first question. So thank you, Sarah, for this question, because indeed, I went relatively quickly to leave time for Q&A. So I'm able to deep dive a little bit more on this 500 million that has been the result of a strong effort from all the organizations. I just would like to remind that it's a mix of cash and P&L impact, even if a vast majority is on P&L. And as you can imagine, it's indeed split across COGS, ANP and structure costs. On structure costs, I'm not going to deep dive. I think it's a fairly easy math question. In terms of the decline that we are able to generate. On the COGS, to deep dive a little bit, here it's really a combination of what we call procure. So it's really all the improvements that we are managing with our suppliers, also managing that in a much more effective way, which impact the COGS and the ENP with the proof point as well on our decrease non-working by 33% as an example. and also on the make, where here we are also looking at optimizing our manufacturing footprint and really also optimizing our assets, which allows us to generate significant savings on this line as well.

Okay, thanks.

Thank you.

Next question is from Simon Hales, C.T.

Good morning, Alexandre. Good morning, both of you. So my first question is, let me just go back to India. I wonder if you could talk a little bit more about the free trade agreements and what impact that is starting to have on your business already, your plans for fiscal 2037 and beyond. With that in mind, what are you starting to do, particularly in the Scotch business that you have on the ground there, to build your brand with your premium options even further there? And then my second question is just around your ambitions in the ready-to-drink category, really, Alexandre. You've often reached 2.5% of net sales. Do you expect a further sharp acceleration in the contribution of that category as you move through fiscal 2017, as innovations come online? Just something to look forward to.

Sure, maybe on the FTA agreement with the UK, which is now into full effect and has been so for exactly six weeks. It came into effect on July 15th. I've always qualified this potential happening, because it's been years we've been talking about it together, by the way, and with many others, as the cherry on the cake. But now the cherry on the cake is there. It's difficult to share with you some very specific insights as to how we're leveraging this FTA to accelerate our performance in India, just because I would say competitive and sensitive information, that being said. You should not be surprised if we were to introduce new propositions coming from the UK into India around the Scotch, of course. Thank you very much. And at the end of the day, when you look at our strategy in India, you know, focused, first of all, by the way, on these local brands with the great success of Rolstag, with great success of Blender's Pride. By the way, we're primitivizing these two brands with innovation as well. With a recent launch back in October, November, coincidentally, with the disposal of Imperial Blue of Exclamation, which is a full range brand. Transcription by CastingWords And of course, the second cherry, sometimes you have two cherries that come along, could be, could be, again, you know, we never like to bet on these topics because we're not in control, but could be an EU India FTA, which is currently being discussed. and which when it comes down to us would look a little bit like the UK India FTA and this would be a great boost for the number one imported spirit brand in India which as you all know is Jameson, and for a number of other brands we have. But that would be a second cherry on the cake, and we'll see. All this just to say that all the lights are green from a business point of view in India. It is a buoyant market. It is growing, not just for us, the market itself, the country itself. And the degree of optimism is somewhat refreshing, particularly when you come from India, For France, for instance. On RTDs, our intention is indeed to increase our investments behind RTDs, to increase our innovation behind RTDs. And more specifically, which I think this is the key to increase the pace at which we come to market with our RTD propositions, which, by the way, goes hand in hand with our route to market optimization for RTDs. which somewhat varies quite significantly from the traditional I would say bottled spirits route to market and I would also say the same for the marketing playbook. We're seeing a different marketing play for RTD propositions. So we're working on it. I'm not going to share with you what our expectations are for RTDs, but to the question, the broader question of are RTDs a priority for us? Yes, as well. They're a great complement to our portfolio and we intend to invest behind those. Next question is from Olivier Nicolai Goldman Sachs. Hi, good morning, Alex and Mauve. The first question is on Europe.

If we could go back to the performance, which was a bit softer in H2,

You flagged weak performance in various countries. Just wondering how should we think about the region in full year 27? And then for MOUV, could you give us a bit more details on gross margins into next year? Would you expect it to be more under pressure as input costs increase? And do you factor any potential tariff refund in your guidance? Thank you.

Thank you. On your first question, The beauty on one side and the gloom on the other side of Europe is its lack of volatility to some extent. So you'll never see Europe as a region up double digit or down double digit. What you will see is within Europe, you'll see some ups and downs and the ups that offset the downs and so on and so forth. But At least one can view Europe as a stable, I would say, homegrown territory which doesn't have excessive volatility one way or another. At least in a very volatile world, we know we have a broadly stable base in Europe, sometimes growing quite nicely, sometimes in some degree of decline, as we have experienced before. Transcription by CastingWords But in Spain and in Germany, it's fair to acknowledge that the market is soft and, by the way, that we're losing share in both of these markets. Otherwise, and I did mention, the UK is coming back to positive trends. Ireland is in positive trends. And the more we go central and east, the more dynamic the growth is.

And I'll thank you for the second questions, even if I have to say that I believe I answered as the first question. So I warn you, Olivier, I may probably say the same thing, but a bit differently. But don't expect me to trap me in telling much more. We know that indeed for next year, our margin will be pressured by, as I mentioned, wet goods increase and Middle East conflict that will weigh on. Thank you very much. We hope and we believe it will be partially mitigated by the FTA impact in India this year. I hope this time it's clear.

Morning, Alex. Morning, Mauve. Two questions, please. The first is for Mauve. I think on slide 25, you talked through where we are on the cost savings agenda, and cost savings have been delivered one year early. As you step into the CFA seat, could you perhaps talk about potential further opportunities beyond fiscal 28, given that that slide 25 has a beyond element to it? And then the second question, perhaps for Alex, In your final remark of your presentation, you talked about the engagement of your teams. Clearly outside of U.S. and China, you're seeing a decent outperformance versus the whole market. Can you provide an update on how you're managing through that dynamic, continuing to keep people engaged, yet with the pressures of U.S. and China holding you back?

Let me start with your second question, because I think it's obviously a critical question, a key question, particularly in an environment where a big chunk of the growth in a subdued environment will come from Marketshare gains, which is not just a game of creativity, of ideation, creativity, innovation, route to market, and so on. It's also related to underground people commitment. Thank you very much. IE, the romanticism of a brand. Consumers are extremely, extremely sensitive to what a brand represents. But at the same time, they're sensitive to the price of the brand. They're sensitive to the packaging of the brand. They're sensitive to where the brand is positioned on the shelf. They're sensitive to how we bring that brand to life. They're sensitive to the channel we use to interact and engage with consumers on that front. So commitment is absolutely critical in our industry, and particularly it's something that we very fundamentally cherish at Bernard Ricard, so we follow that in many ways. We used to do what we called the I say report, which was initially every two years, then turned out to be every year, but leveraging tech and digital capabilities, we can now do pulse surveys, and One of the key things I follow through these pulse surveys, because then management is empowered to leverage these pulse surveys here and there, is to monitor that degree of commitment by function, by affiliate, globally, and so on and so forth. That's the first way we monitor this. And on that front, you'll be surprised. How responsible people are, because they understand the situation and they know. And the way we deal with our efficiencies, we do it in the most transparent and the most responsible way. But at the end of the day, people understand that business is business, that imperatives are imperatives, and they are ready for that. The second way, and it's not just me, it's the leading team here, We travel. We travel extensively. We have a travel policy, by the way. There's some cost discipline around travel, but not for me. I spend my time in airplanes, traveling, meeting the teams, having these town halls, having these dialogues. And then I have these brought, by the way, later today. I think it's at 2 p.m., if I'm not mistaken. Thank you very much. 16,000 wide exchange with the whole troops to explain. When people understand, they buy into it. And so communication is absolutely key. Right now, this morning is focused on external communication for external stakeholders who are absolutely key for us. But this afternoon is going to be internally focused because they need to understand our results. They need to understand where we want to go, why we want to go there, and they need to understand it with enthusiasm and the winning mindset.

So as it relates to our operational efficiency, so apparently I have still T&E opportunities to grab, but no kidding aside, thank you for noticing that indeed we have been on purpose putting beyond, and on purpose I introduced the slide as well to say that it's a continuous journey. So I'm definitely not going to sit down on my seat and live on Helene's legacy, but really actively working in finding new opportunities. Thank you. Thank you.

Next question is from Chris Pitcher, Rothschild & Co, Redburn.

Thank you. Good morning. Good morning, all. A couple of questions. Firstly, Alex, on the must-win market strategy that you introduced us to back in 2015, but when you introduced that, those four key markets had grown phenomenally over the previous decade. But if I've got my maths right today, they're actually a slightly smaller share of the total group Paul-Robert Bouhier, Anne-Marie Poliquin, The reference shareholder, Societe Publica, has committed to take shares in the final dividend. Is that an ongoing commitment? Should we model share option until you get to three times net debt debitor? And have you had any other assurances from other shareholders that you can give us an idea on in terms of share uptake? Thank you.

Okay, so let me start with the second and then the first, so I don't forget your second question. Basically, if I translate your question, is this, first of all, a one-off script that we are offering? First of all, again, let's be clear, our focus is to continue actively our deleveraging strategy. A script remains an option, but frankly speaking, no decision has been made at this stage. Yes, our reference shareholder, again, has supported that proposition for this year and will opt for shares, and so has JBL, to be quite clear on that front. When it comes down to your first question, Well, the four most wins are still the four greatest markets in terms of size and, in some cases, medium-term potential. In other cases, maybe long-term potential. But, you know, the U.S. is still our number one market. Thank you very much. I would say dynamic market, not from a growth point of view, but from an opportunity point of view, if we're great at creating, at innovating, at executing, etc., and at pace, which is something we're stepping up as we speak. So we are investing above group ratios in terms of marketing in the U.S. market, or India. Thank you very much. As a matter of fact, from that point of view, traveler expectations are still going to be growing. We've been hit, as you know, by that Middle East crisis, but we do expect that channel to continue to be a growth driver in the future. Some issues with Middle East right now, of course, and it's a great brand building channel. Thank you very much. Well, let's not forget China has been very cyclical in the distant and more recent past. Right now there is continued softness. We'll see what happens, but the reality is the underlying fundamentals in China, and we currently see them on our premium brands portfolio, Thank you very much. You know, circa 16, it can be 15, 17. What really matters is are we getting, you know, are we sweating our assets the right way? Are we getting the right return on spend, which Mauve shared with you a few metrics on that front. Consumer facing A&P, basically what consumers see on our brands, has increased. What has fundamentally decreased is what we call in our internal jargon non-working A&P by leveraging expertise and capabilities including content production with tech and many other things. At the end of the day, we're committed to investing behind our brands to make them relevant and to engage with the right consumers through the right channels. Thank you very much.

We have time for one more question, which is from Sanjit Aweela, UBS.

Sanjit Aweela Yeah, hi, Alex. I just had a couple of follow-ups. Most of mine have been answered, but just coming back to China, and you highlighted there a bit more optimistic feedback from the trade. Is that just lapping stricter enforcement of prior government regulation? Are you seeing actual, any genuine signs of stabilization in the nightlife and banqueting channels? and secondly, just coming back to US destocking, can you just clarify, are you expecting the quantum of destocking to be less in fiscal 27 versus fiscal 26 or about the same? Thank you.

Sure. So for China, I'll let you talk about the destocking. So for China, both or all of the above, the reality, and you're right to mention it, we have now started lapping a decision which was taken back in May of 2025. We basically call an alcohol ban, which was, and the entire industry, including local players in Baiju, etc., felt it for the full, our full fiscal year 26. And, of course, I strongly believe, and it's purely, in that case, technical issues, As the weeks come by, and I would say by the end of September, October, frankly, we'll be lapping a new base from that point of view. So for sure, this helps. But at the same time, it is true that Trade sentiment ahead of Mid-Autumn Festival for the first time in a number of years is cautiously optimistic and we have seen as well some degree of improving underlying trends. I'm not going to call it we're back to growth in China, definitely not, but there's something happening and something new in a number of years for China.

So on the USD stocking, so indeed, as we mentioned, we are expecting some inventory adjustments both in the US and in China starting Q1. And indeed, we know that this year we have been expecting Thank you very much. Thank you all for joining us today. We wish you a good rest of the day. Thank you.